Garuda’s Citilink plans fleet of 24 A320s by end of 2013

Garuda Indonesia budget unit, Citilink, plans to lease 24 A320s before the first of the 25 A320s Garuda is purchasing from Airbus is delivered in 2014. Citilink, which is currently a unit of Garuda but will be separated out and converted into a subsidiary company in 1Q2012, took delivery of its first leased A320 in Aug-2011. A second A320 is being delivered this week and two more will be delivered by year-end, giving Citilink a fleet of four A320s and six B737s. Garuda CEO Emirsyah Satar says Citilink is projected to have a fleet of 14 A320s by the end of 2012. The fleet plan envisions 10 additional A320s for 2013, including the six which Garuda recently secured as part of a deal with GECAS. [more - CAPA analysis]

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Southeast Asian airlines are seeking to capture a larger share of the Southeast Asia-US market over the next few years as they launch new flights to the US. Three of the region’s flag carriers and at least one long haul LCC are planning to launch flights to the US, intensifying competition in an already fiercely competitive market.

Southeast Asian airlines currently account for less than a 20% share of the total Southeast Asia-US market. Philippine Airlines and Singapore Airlines are the only significant players in this market and are aiming to increase their share as they add new nonstop routes. Garuda Indonesia, Thai Airways and Vietnam Airlines are also keen to become significant players as they launch flights to the US, replacing their now limited offline products.

However, market share gains will likely come at the expense of yields and profitability as competition with North Asian airlines – and to some extent US and Gulf carriers – intensifies. North Asian airlines now account for more than 50% of bookings in the Southeast Asia-US market and have increased their reliance on Southeast Asian connections as they have added US capacity, resulting in very competitive fares.

The deployment of new generation ultra-long-range widebody aircraft is prompting several airlines to plan new nonstop services between Southeast Asia and the continental US. New variants of the A350 have particularly emerged as a new, more efficient and popular option for Southeast Asia-US flights, with orders over the past year from three Southeast Asian flag carriers.

On 5-Sep-2016 Vietnam Airlines became the latest Southeast Asian airline to commit to new generation ultra-long-range aircraft capable of new nonstop routes – joining Philippine Airlines and Singapore Airlines. Garuda Indonesia and Thai Airways are likely to follow, resulting in four Southeast Asian airlines operating nonstop flights to the US by early next decade, compared with only one currently.

Delta Air Lines may also join United Airlines with nonstop Southeast Asia-US services. There are opportunities in the Southeast Asia-US market for nonstop routes, but competition with one-stop products will be intense. Profitability will be heavily challenged or non-existent. SIA started the trend due to strategic, not financial, imperatives. Under the charm of low fuel prices, Southeast Asian airlines risk falling into the spell of "me too" nonstop flights, just as they did with over-sized aircraft acquisitions.